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You have likely signed many commercial contracts whilst running your business. Contracts can be very useful in defining business activity between you and other companies and consumers. However, business relationships can cause commercial disputes, including contract disputes. All types of commercial disputes can be timely and costly for your business. Hence, it is in your interest to resolve them, and you may use alternative dispute resolution methods for this. Ultimately, avoiding contractual commercial disputes is the best action you can take. Therefore, this article will explain the common reasons for contractual and commercial disputes to help you understand how to avoid these.
What are Contractual Commercial Disputes?
A contractual dispute is when the parties to a contract dispute something relating to it. Therefore, they may disagree on a contractual term within it. Alternatively, they may have a dispute over a party not carrying out their contractual obligations or not carrying them out precisely as they should do according to the commercial contract.
Commercial contracts are legal agreements, so contractual terms must be complied with.
What are Common Causes of Contractual Commercial Disputes?
Understanding the common causes of contractual commercial disputes is essential to avoid them.
Below, we list some of the common causes of contractual commercial disputes.
Contract Format
Not all commercial contracts are written contracts. Instead, some commercial contracts are oral, which can be a common cause of a contractual dispute.
Contractual disputes can occur in terms of whether or not the contract exists in the first place. They can also arise because agreeing on the contract’s terms can be challenging. The format of a contract can also be conducted or through correspondence. These can also cause contractual commercial disputes.
Poorly Drafted Contracts
Another typical cause of contractual commercial disputes is when the contract is poorly drafted. Your business contracts must be well-drafted to ensure accuracy within the agreement between the commercial parties. This enables parties to understand their contractual obligations.
A clearly defined contract will also clarify the meaning of definitions in the agreement, such as industry norms, legal terms, and jargon. It is also essential to carefully document negotiations leading to the formation of a contract to reduce the possibility of contractual commercial disputes.
Ensuring that everyone in your business understands the contractual terms is essential. You do not want them to cause a contractual breach, which you then have to deal with. This can apply, for example, to your:
- employees;
- contactors; and
- freelance workers.
Commercial Contract Breaches and Disputes
A contractual breach is a common cause of contractual commercial disputes. A contractual breach is where one or more parties to the commercial contract do not carry out their contractual obligations or do so as they should.
In business, a party to a commercial contract may breach it, for example, where:
- they deliver faulty goods to customers;
- the buyer has not paid for services in time; or
- where a seller provides goods or services late.
Non-Future Proof Contracts
You should consider the future of your business when drafting commercial contracts. Not doing so can be a common cause of contractual commercial disputes.
It is essential to think about your business’s future, as you do not want your commercial contracts to hinder this or not provide for it.
This fact sheet outlines how your business can manage a dispute.
For example, you may wish a commercial activity to continue for a specific time, so the contract should record this. However, you may want to avoid being tied to the contract for too long as you may change the direction of your business.
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Key Takeaways
While running your business, you will commonly form contracts with others, so you could run into a contractual commercial dispute. A contract is a legally binding agreement, and a contractual dispute occurs when parties to the contract disagree on a part of it. There are many common causes of contractual disputes, and understanding these can help avoid one. For example, the format of a contract, such as an oral contract, can cause a contractual dispute.
Poorly worded contracts with unclear terms can also cause a contractual dispute. Other common causes include a commercial contract that is not future-proof and does not account for your business’s future plans. A contractual dispute can also occur where parties to the contract breach the commercial contract.
If you need help understanding common causes of contractual and commercial disputes in the UK, LegalVision’s experienced disputes and litigation solicitors can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
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